Intuit Investor Day: We Like Its Big Bets on the Small-Business Ecosystem; Shares Fairly Valued

Intuit INTU hosted its investor day today, stressing five big bets that are informing the firm’s long-term strategic moves. Of the big bets, we think Intuit’s wagers on being the center of small-business growth and disrupting the small-business midmarket are the most compelling and promising to fuel growth ahead. Additionally, we continue to be impressed by Intuit’s ability to innovate internally as well as make smart acquisitions, which we believe are further strengthening Intuit’s already wide moat. Milestones highlighted through the day’s events (like customer retention uplift for customers using newer offerings like QuickBooks Live) keep us reassured in what we believe to be a rosy trajectory for Intuit. Intuit marked its total addressable market at $312 billion, which implies 5% penetration thus far and, unsurprisingly, Intuit reiterated fiscal 2024 guidance given last month with fourth-quarter results, leaving our financial model unchanged. As a result, we are maintaining our $500 fair value estimate, which leaves Intuit shares fairly valued.

We see an overall trend of newer offerings uplifting retention, which is crucial to Intuit’s business, given the lower retention rates typically inherent in Intuit target markets. For example, Intuit noted a 9-point uplift in 90-day retention for QuickBooks Live customers as this capability’s human-assisted approach moderates churn out of lack of handholding.

Intuit’s big bet to expand its small business ecosystem well beyond QuickBooks is promising in our view, as we think which accounting software to use is typically one of the initial software decisions a small business makes, making it a great entry point to additional offerings. We think Intuit’s sizable bills recorded in QuickBooks ($947 billion worth in fiscal 2023) indicate a hearty segue into digitizing bill pay and automating accounts payable. Intuit sizes its payments, invoicing, banking, and capital opportunity at $82 billion.